Look After Potential Assets Through Inheritance Tax Planning

Inheritance tax planning is a necessity if you intend to leave behind assets of some value after your death. It makes financial sense to find out how and where the highest rates of inheritance tax occur.  By doing your homework, you can take measures now to reduce this tax, possibly even eliminating it in its entirety in some instances.  

Keep Within the Threshold Before Gifting

The threshold for inheritance tax changes each tax year, but it is possible to gift a spouse or civil partner the maximum amount without exceeding the nil rate.  A spouse or civil partner is known as an exempt beneficiary and, whilst there are certain rules to adhere to, gifting them your assets is often one of simpler ways to avoid paying the Inheritance tax.   

Give Generously to Those Closest

The next best thing to gifting is giving. It is possible to give away a specific amount of money every tax year, perhaps to other close family members and friends, as an exempt transfer.  Anything made over the limit will be liable to tax, but on a sliding scale depending on how many years before death the transfer was made.   

Consider Opening a Trust Fund

Trust funds aren’t just for the wealthiest of people, they can also be used as another method of controlling the amount of inheritance tax levied. With a selection of trust types to choose from, though the recipients of the fund may incur some tax charges, distributing your assets this way ensures they no longer form part of your estate in terms of tax purposes.  Trust funds can be set up at any time, but requesting them in your will further ensures you avoid Capital Gains Tax.  

Think About Donating to Charity or Other Worthy Causes

Anything left to charity is free of inheritance tax. This exempt transfer also applies to universities and even political parties. Additionally, by leaving at least 10% to charity, it is possible to further reduce inheritance tax on the remainder of your assets; a better tax scenario for all involved.  

Inheritance Tax Planning at Its Best with A Life Insurance Policy

This is an idea that many people don’t consider because it cannot reduce the inheritance tax. However, taking out life insurance ensures any potential inheritance tax bill can be paid outside of your estate, making it easier financially for those left behind. This is usually the most cost-effective way of coping with the aftermath of this tax liability. Overall, it is strongly recommended that whatever choices you make to reduce or avoid inheritance tax, you should state them clearly in your will. That way, your wishes are adhered to and your inheritance tax planning is put to good use. It goes without saying that for such planning, professional advice will ensure you get it right first time, whilst making full use of the tax relief currently on offer to you.

Inheritance tax planning in Grimsby

Want to know more about Inheritance tax planning in Grimsby? Call one of our accountants in Grimsby on 01472 355215 or email grimsby@hwca.com for IHT advice. Alternatively contact us online.